Krispy Kreme Doughnuts in 2005:Are the Glory Days over
8. Krispy Kreme Doughnuts in 2005: Are the Glory Days Over?
Overview
In early 2004, Krispy Kreme’s prospects appeared bright. With 357 Krispy Kreme stores in 45 states, Canada, Great Britain, Australia, and Mexico, the company was riding the crest of customer enthusiasm for its light, warm, melt-in-your-mouth doughnuts. During the past 4 years, consumer purchases of Krispy Kreme’s doughnut products had taken off, with sales reaching 7.5 million doughnuts a day. Considerable customer excitement—approaching frenzy and cult status—often surrounded the opening of the first store in an area. For instance, when a new Krispy Kreme opened in Rochester, N.Y. in 2000, more than 100 people lined up in a snowstorm before 5 a.m. to get some of the first hot doughnuts coming off the conveyor line; within an hour there were 75 cars in the drive-through lane. Three TV stations and a radio station broadcast live from the store site. The first Krispy Kreme store in Denver grossed $1 million in revenues in its first 22 days of operation, commonly had lines running out the door with a one-hour wait for doughnuts, and, according to local newspaper reports, one night had 150 cars in line for the drive-through window at 1:30 am—opening day was covered by local TV and radio stations, and off-duty Sheriff’s deputies were brought in to help with traffic jams for a week following the Denver store’s grand opening.
To capitalize on all the buzz and customer excitement, Krispy Kreme added new stores at a record pace throughout 2002-2003. The company’s strategy and business model were aimed at adding a sufficient number of new stores and boosting sales at existing stores to achieve 20 percent annual revenue growth and 25 percent annual growth in earnings per share. In the just-completed 2004 fiscal year, total company revenues rose by 35.4 percent, to $665.6 million compared with the $491.5 million in the fiscal 2003. Net income in fiscal 2004 increased by 70.4 percent, from $33.5
Overview
In early 2004, Krispy Kreme’s prospects appeared bright. With 357 Krispy Kreme stores in 45 states, Canada, Great Britain, Australia, and Mexico, the company was riding the crest of customer enthusiasm for its light, warm, melt-in-your-mouth doughnuts. During the past 4 years, consumer purchases of Krispy Kreme’s doughnut products had taken off, with sales reaching 7.5 million doughnuts a day. Considerable customer excitement—approaching frenzy and cult status—often surrounded the opening of the first store in an area. For instance, when a new Krispy Kreme opened in Rochester, N.Y. in 2000, more than 100 people lined up in a snowstorm before 5 a.m. to get some of the first hot doughnuts coming off the conveyor line; within an hour there were 75 cars in the drive-through lane. Three TV stations and a radio station broadcast live from the store site. The first Krispy Kreme store in Denver grossed $1 million in revenues in its first 22 days of operation, commonly had lines running out the door with a one-hour wait for doughnuts, and, according to local newspaper reports, one night had 150 cars in line for the drive-through window at 1:30 am—opening day was covered by local TV and radio stations, and off-duty Sheriff’s deputies were brought in to help with traffic jams for a week following the Denver store’s grand opening.
To capitalize on all the buzz and customer excitement, Krispy Kreme added new stores at a record pace throughout 2002-2003. The company’s strategy and business model were aimed at adding a sufficient number of new stores and boosting sales at existing stores to achieve 20 percent annual revenue growth and 25 percent annual growth in earnings per share. In the just-completed 2004 fiscal year, total company revenues rose by 35.4 percent, to $665.6 million compared with the $491.5 million in the fiscal 2003. Net income in fiscal 2004 increased by 70.4 percent, from $33.5